Many investors resort to a “do-it-yourself” approach that manages their portfolios, including stocks, ETFs, and mutual funds. However, not have the enthusiasm to do so primarily for those who don’t have the luxury of time, temperament, or inclination towards management. Insert a Robo-advisor – an excellent alternative for this kind of dilemma. Today, we’ll take a closer look at two of Canada’s leading Robo-advisors – Wealthsimple and Nest Wealth – and see a battle of who is best for investors. These two Robo-advisors have been among Canada’s frontrunners since their respective launches in 2014.
Each of the two Robo-advisors allows investors to handle their investments through a portfolio of ETFs, which are low-costing and broadly diversified. This option offers a whole hands-off experience, allowing investors to focus on other aspects of their lives, with sift-free management of financial statements and worry-less rebalancing experience.
WealthSimple vs Nest Wealth: Why a Robo-Advisor?
It can be a very daunting task to plan your investments when you first think about them. It can be a bewildering array of choices you need to go through, plus the effort required for you to plan, monitor, and adjust your portfolio at all times necessary. You could only wish to have an automated tool that can manage everything for you when this happens, right? When automation has become part of basically every aspect of life, Robo-advisors are the best choice to help you manage your investments.
Robo-advisors in Canada are digital financial advisors that provide you financial advice or manage your investments, requiring moderate to minimal intervention from your end. They are programmed to digitally delivering advice using inputs sent by the investors. Thus, Robo-advisors are designed to work with very little human input. However, this scenario is very far from being true. In India, most Robo-advisors are still a bit simplistic and need basic questionnaires in understanding investor behaviour. They use algorithms to understand and predict eventual preferences, risks, and goals for each investor. They usually do this by interpreting answers based on a set of questions, psychographic and demographic, eventually leading to the desired model portfolio. Basic profile questionnaires include gender, income, liabilities, current allocation of assets, and their willingness to take on risks, among others.
Then, simplistic Robo-advisors make use of this information in creating the investor’s profile. On the other hand, comprehensive ones do a more in-depth information search using AI and data. Examples include financial transactions like investments, bank and credit card transactions in understanding the investor’s economic behaviour in actuality. Advanced tools like these aid comprehensive Robo-advisors in judging investor’s financial behaviour, projecting how they’re likely to behave in particular situations. These predictions enable comprehensive Robo-advisors to precisely analyze what investors do instead of relying only on claims. This process reveals information investors may be unaware of, like higher spending than what is estimated, overlooked liabilities, or patterns of cautiously-done decision-making.
Choosing Your Robo-Advisor: What to Consider
Investment provider or Robo-advisor comparison can become something less of a worry. Here are several tips to get you started:
1. Pay close attention to account minimums.
Choosing a Robo-advisor that is relevant to what you can invest now and, in the future, can be a deal-breaker. Some require a deposit of as much as $100,000 to get things started. In some instances, dropping below the account minimum could result in nasty penalties, or worse, forced closure of your account.
2. Watch out for any hidden fees.
Long-term gains get eaten away quite quickly with fees alone. Though necessary, management fees are what we’re talking about here. In addition, account transfers and trading fees can also add up to this. Best investment providers need to be upfront with their fees and what it costs to invest with them, resulting in a trustworthy financial relationship moving forward.
3. Seek out human support.
Nothing compares to interaction with another person when wanting to make sense of mysterious numbers sprouting in your monthly statements. Unfortunately, with competition in offering the lowest possible management fees getting tighter by the minute, some Robo-advisors quickly cut customer support at the expense of everything. So, before committing to any provider, know what support is available for you on their end – you never know when you’ll need it.
4. Make sure a financial advisor is easily accessible.
All of us in this world are unique – the same philosophy goes with financial situations, too. However, investment platforms differ in terms of the level of accessibility you can have to professional advice. So be on the lookout for providers that have easy access to a financial advisor. Unfortunately, only a few offer guidance, especially when you need it, regardless of the amount of money inside your account.
5. Know and understand the amount of freedom you have.
Relationships eventually end – even for long-term investments. So, before committing, know answers to situations like: “what happens if I need to withdraw my funds?”; “what if I want to move on to a new investment platform?”; or, “are there any penalties involved in doing so?”
Player 1: All About Wealthsimple
One of the best Robo-advisors globally, Wealthsimple has assets under the management of more than $5 billion as of August 2019. They also have more than 175,000 clients by August 2019.
Known for its 5-minute sign-up process, which is extraordinarily fast and easy, Wealthsimple is one of the only institutions allowing same-day funding in Canada. Clients are first asked to fill out questionnaires and then assigned a portfolio based on their risk tolerance. This portfolio comprises ETFs between eight (8) and ten (10), each representing a unique asset class. Wealthsimple partners with four of the world’s biggest providers of ETFs. Their Canadian and International stock exposure is from iShares; their U.S. stock exposure is from Vanguard; their fixed income is from BMO; dividend and real estate exposure are from Purpose funds.
In comparison to other Robo-advisors, Wealthsimple standouts because they feature excellent benefits. As small as $1, everyone can already join Wealthsimple. Clients with over $100,000 qualify for Wealthsimple Black, which entails lower management fees of up to 0.40%. Other perks include an experienced Portfolio Manager that can help with tax-efficient investing and goal-based financial planning.
Those with Wealthsimple investment savings account of more than $500,000 can get upgraded to Wealthsimple Generation. This upgrade gives all the benefits offered ib Wealthsimple Black like a 0.40% management fee and in-depth accessibility to financial planning, with an expert team even designing a personalized financial report customized to your personal goals. Regardless of tier, each client of Wealthsimple has unlimited access to human experts that provide financial advice.
- Product lines are broad.
- Trades are provided commission-free.
- Savings accounts are offered with high interest.
- The application process is straightforward.
- They are a little high on portfolio fees.
- The availability of their trade platform is only on a mobile.
Player 2: All About Nest Wealth
Read our full Nest Wealth review here.
Launched in 2014, Nest Wealth was founded by one of the industry’s veterans, Randy Cass. Opening a Nest Wealth account, although entirely online, is secure and encrypted – taking you only around five (5) to ten (10) minutes. In addition, every client gets a personalized portfolio based on their risk profiles, goals in life, and current financial situation.
From providers like iShares and Vanguard, Nest Wealth uses broad-based ETFs, with their portfolio’s average MER around 0.13%. Investors do $9.99 pay trading commissions each trade, with fees capped at $100 annually. Monitoring of portfolios is done daily, with drifts going beyond certain thresholds automatically rebalanced every time.
Nest Wealth is uniquely known for offering subscription pricing models, starting at as low $20 that caps at $80 monthly in addition to an average 0.13% MER. Clients with larger deposits greatly benefit from this fee structure, but not so much with smaller accounts. Therefore, it is best to do the math before you sign up.
Nest Wealth representatives still speak with each client, even with automated onboarding and forms processing, discussing their portfolio options. Nest Wealth also offers tips on which accounts to open – with no minimum amount required, time horizon investments, goals, and risk tolerance via phone, email, or in-person visit.
- Monthly fees are offered for a three-tier flat subscription.
- Any trading fees above $100 are covered.
- Human, financial experts actively manage them.
- Each investor has a customized portfolio.
- They have no Socially Responsible Investment (SRI) options yet.
- Substantial savings are only offered when investment is made in large amounts.
Player Similarities: Wealthsimple and Nest Wealth
This section in our Nest Wealth vs. Wealthsimple comparison will show and discuss the similarities shared by both Robo-advisors.
1. Types of Investment Accounts
Both Wealthsimple and Nest Wealth allow clients to use various account types in storing investments. The following are investment accounts one can use with Nest Wealth and Wealthsimple:
- Corporate Accounts
- Joint Accounts
- Locked-In Retirement Account (LIRA)
- Non-registered Accounts
- Registered Education Savings Plan (RESP)
- Registered Retirement Income Fund (RRIF)
- Registered Retirement Savings Plan (RRSP)
- Tax-Free Savings Account (TFSA)
2. Human-Supported Advice
Crucial to both Robo-advisor, their products offer a feature of human wealth management experts’ accessibility that can provide advice regarding your investments. Investing with both Robo-advisors involves a process of automation based on questionnaires accomplished online that determine each client’s risk tolerance and financial goals. However, the availability of human financial advisors is done over the phone, email, or through live chats on both platforms.
Wealthsimple Black and Wealthsimple Generation clients have better access to financial planning advice than Nest Wealth clients, even with dedicated portfolio managers.
3. Monitoring and Rebalancing of Portfolio
Both Nest Wealth and Wealthsimple constantly monitor numerous investment portfolios that they have with clients. Suppose there is no more extended alignment with their client’s investment goals. In that case, automatic rebalancing is done to the portfolio’s holdings, dependent greatly on market movements and portfolio thresholds to realign back their investment goals and risk tolerance with each other.
4. Amount of Minimum Investment
No minimum deposit is required to open an account and invest both with Nest Wealth and Wealthsimple. But through Wealthsimple Black and Wealthsimple Generation accounts, investors with more significant amounts in their accounts are offered better features.
Player Differences: Wealthsimple VS Nest Wealth
As we move on with our comparison, this section will showcase some most prominent features that make Wealthsimple and Nest Wealth different from one another.
1. Harvesting of Lost Tax
Both Robo-advisors have no offers when it comes to harvesting lost tax. However, with Wealthsimple Black and Wealthsimple Generation customers, they have the advantage of tax-loss harvesting for their portfolios.
2. Socially Responsible Investing (SRI)
Wealthsimple offer broader ranges of investment options for its clients, such as SRI and Halal Investing. However, at this time, Nest Wealth does not provide either option.
Player Uniqueness: Wealthsimple VS Nest Wealth
In addition to our comparison, this section will tell us about some offers and features unique to either Wealthsimple or Nest Wealth.
Wealthsimple Unique Features
- Clients over $100,000 and $500,000, respectively, are offered Wealthsimple Black and Wealthsimple Generation.
- With Wealthsimple Black, clients have lower management fees of 0.40%, financial planning, and tax-loss harvesting.
Nest Wealth Unique Features
- They assign dedicated portfolio managers to each client.
- Before opening new accounts, discussions with each client in creating completely customized portfolios based on their financial goals are discussed. They also help clients set their financial goals if they are not sure yet.
Final Round: Nest Wealth Vs. Wealthsimple
In the battle of the best Robo-advisors, here are some takeaways you can use to determine which one to choose eventually
Choose Player 1, Wealthsimple if:
- You are looking for a low-fee structure on-set of investing.
- You want expert financial advice and have higher investment capital of $100,000 for Wealthsimple Black and $500,000 for Wealthsimple Generation.
- You seek Halal or SRI portfolios.
Choose Player 2, Nest Wealth if:
- You got substantial capital for an investment of over $250,000, allowing you to enjoy fees so low they are comparable to DIY investing strategies.
- You want 24/7 access to a dedicated portfolio manager who can help you create a completely tailor-made investment portfolio based on your financial goals and risk tolerance.
Each Robo-advisor has its strengths and weaknesses in equipping you to your financial battle regarding your investments. Today, we have presented each Robo-advisor’s battle regalia that can help you if you choose either of the two. But, with this great information comes greater responsibility. Robo-advisors like Weathsimple and Nest Wealth are here to help you, but the most significant power over your finances is all up to you. So, please take advantage of the help they can provide and move yourself and your investment towards a future of greatness.
Is Questrade good?
Nest Wealth VS WealthSimple
Users must invest at least $1,000 and can expect fees of between 0.4% and 0.7%. Administration fees are 0.24% for accounts with balances between $0 and $99.99 and 0.20% for accounts over $100,000. Monthly subscription plans start at $20 per month and are capped at $80 per month.
The average total costs are calculated based on management fees by Invisor at 0.5%, and the average management expenses ratio (MER) embedded securities under portfolio management at 0.2%. For investors with more than $100,000 in assets, the management fee is 0.25%, which can be reduced to 0.20%. Additionally, the MER (management expense ratio) of the ETFs held in your portfolio is a weighted average of 0.10% – 0.35% of the value of your SmartPortfolio account.
Minimum investment No minimum investment to open an account to invest in Wealthsimple Basic Nest Wealth Your money can be invested until you reach $1,000 in deposits Tax Loss Harvesting Questwealth offers tax losses harvesting for all customers Wealthsimple Black offers tax losses harvesting for customers of the WS Black generation. In addition, investors with an account over $325,000 can pay lower fees on Wealthsimple for larger portfolios above $325K and save on Nest Wealth a lot of fees. Wealthsimple Nest Wealth Total Valuation Young & Thrifty 4.9 4.6 Social Responsible Investing Halal Investing Dividends Reinvested Minimum Balance Start Investing None Auto Deposit Management Fees 0.5% 0% $100K $20 / month $75K $40 / month 75% 150K $80 / month 150K.
Robo Advisor Annual Fees (MER) and Other Fees Wealthsimple Basic 0.40% to 0.50% per year (average $0.20 MER) None Portfolio 0.20-0.25% per year (average 0.19 MER) None Nest Wealth 2.0-8.0% per month (average $1.13 MER) Customers pay $9.99 per trade and are cap at $100 per year. Responsible Investing Both Wealthsimple and Questwealth offer responsible investment portfolios, but Nest Wealth currently has no SRI option. The below comparison table gives you an idea of how much it costs to invest in various portfolio sizes, such as $50,000, $150,000 and $250,000.
It is essential to mention that this chart does not show that Nest Wealth has a flat fee of $265K but instead shows a gradual and unstoppable increase in Wealthsimple fees. There is another way to display the data: Wealthsimple vs. Nest Wealth’s annual fees as a percentage of total investments minus capital and interest.
Nest Wealth specializes in low-cost ETFs and charges an average of 0.13 percent for balanced portfolios. Its fee structure becomes cost-effective for investors with account balances above $250,000. Wealthsimple offers a cost-effective solution to investors with lower balances.
Both Nest Wealth and Wealthsimple monitor the different investment portfolios they offer to their clients. When portfolios no longer align with a client’s investment objectives, they balance them based on market movements and portfolio thresholds to realign their investment objectives and risk tolerance. As a result, Wealthsimple Black and WealthSimple Generation customers have better financial planning advice than Nest Wealth customers because they are assigned a dedicated portfolio manager.
Wealthsimple has a more robust range of services depending on account size, and there are no promotions or fees for the first year, so look for them if you decide to go with them. Both Questwealth and Nest Wealth have a team of portfolio managers that look after your investments but don’t offer personal financial planning to their clients. In addition, Questrade has launched its own Robo-adviser platform called Questwealth Portfolio.
Nest Wealth is a Robo-adviser in Canada that offers a professional online portfolio management service for investors who want to minimize their investment fees and maximize their returns. There is no fee associated with Questwealth Portfolio account opening or closing, trading fees or electronic fund transfer fees. A significant advantage of Nest Wealth is that once you open an account with the platform, you can get professional support from a registered adviser who will be available to you via email, chat or phone.
By automating parts of the investment process and using passive investing strategies to reduce fees, Robo-advisers not only minimize the burden of damaging behavioural distortions on your portfolio but also show that they can increase your chances of outperforming actively managed investment funds over the long term. There are several Robo-advisers in Canada, and each offers its unique perks and strategies. For example, Robo-advisers such as Nest Wealth and Wealthsimple offer investors small accounts access to professional wealth management at low fees.
Ultimately, with more than two Robo-advisers, there are plenty of considerations when planning ETFs, fees and returns on your portfolio. If you’re not prepared to spend an evening calculating maintenance fees and don’t speak Microsoft Excel terms, give Investing Better Canada an online fee calculator and select the Robo-adviser that offers you the most cash for your hard-earned money. I’m not sure I’ve ever discussed using Wealthsimple over TFSA or RRSP.
We have customer service, access to financial advisers and no minimum accounts. Boomer Echo readers will receive a 50% cash bonus when they open an account and fund up to $500 in 45 days. Once you deposit more than $100,000 into your Wealthsimple account, you can unlock our Premium and Black plans.
Nest Wealth charges are considered a percentage of assets, and as the portfolio grows, they will rise to 80 percent per month, meaning fees will fall over time relative to the size of your account.
While Robo-advisers are not built for millennials, investors of all ages and stages can benefit from a low-cost, hands-on approach to investing. Nest Wealth is aimed at those who have a lifetime of investing or are thinking about retirement. Because of its unique fee structure, the best perk for these investors is that Nest Wealtha’s EFT portfolio options are suitable for those with lower risk tolerance.